Taylor v. Krugman, Round 2

Paul Krugman (click through to see Krugman’s corresponding charts):

Via Brad DeLong, I see that John Taylor is peddling the zombie claim that there has been a huge expansion in the federal government under Obama.

Sigh.

[...]

In answer, the peddlers of this myth point to the fact — which is true — that federal spending as a share of GDP has risen, from 19.6 percent in fiscal 2007 to 23.6 percent in fiscal 2010. (I use 2007 here as the last pre-Great Recession year). But what’s behind that rise?

A large part of it is a slowdown in GDP rather than an accelerated rise in government spending. Nominal GDP rose at an annual rate of 5.1 percent from 2000 to 2007; it only rose at a 1.7 percent rate from 2007 to 2010. How much would the ratio of spending to GDP have gone up if spending had stayed the same, but there had not been a slowdown?

…about half of the rise in the ratio is due to a fall in the denominator rather than a rise in the numerator.

That still leaves a significant rise in spending. What’s that about?

[...]

“Income security” is unemployment insurance, food stamps, SSI, refundable tax credits — in short, the social safety net. Medicaid is a means-tested program that also serves as part of the safety net. Yes, spending in these areas has surged — because the economy is depressed, and lots of people are unemployed.

What we’re seeing isn’t some drastic expansion of Big Government; we’re seeing the government we already had, responding to a terrible economic slump.

John Taylor subsequently defends his op-ed in the Wall Street Journal, the point of which was to demonstrate the the budget presented by the president sought to make this increase permanent:

Krugman is wrong. The Administration’s budget did propose spending levels which make the recently increased rate of government spending as a share of GDP permanent, regardless of the reason for the recent increase. If you want to see this in a way that takes account of changes in nominal GDP growth related to the recession, then you can compare actual spending before the effects of the recession began with proposed spending after the effects of the recession are over. For all of 2007, spending was 19.6 percent of GDP. For all of 2021—after the impacts of the recession and the final year of the budget window—the budget submitted in February proposed spending equal to 24.2 percent of GDP. These two budget facts are part of the data presented in my Wall Street Journal chart and are taken directly from CBO tables. The 4.6 percentage point increase represents $1 trillion more federal spending per year at 2021 levels of GDP.

The emphasis is mine.

I will let readers be the judge of who is being partisan.

2 responses to “Taylor v. Krugman, Round 2

  1. Both are being partisan.

    So why should there be anything wrong about that?

    Moreover, the bulk of the increase in 2021 stem from demographic factors and legislation passed some time ago before Obama became president and
    both democrats and republicans passed the laws that will cause higher spending in 2021.

    You are giving the impression that the higher spending in 2021 is the result of new programs initiated by Obama. Well, maybe not you, but Taylor clearly is. So again we go back to Krugman’s challenge, name a new program from Obama that is responsible for the higher spending in 2021.

  2. Who cares if it is Obama’s fault? Taylor and Krugman seem to care, but I certainly don’t.

    In addition, the point put forward by Taylor (regardless of who he blames) is that there is a distinct difference between the budgets put forth by the House and by the president in terms of government spending. I read the op-ed as a call for a debate over which path we should choose — of course bearing in mind that Taylor clearly favors the House plan.

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